Friday, March 24, 2017

Cash Healthcare Markets

And if I should falter
Would you open your arms out to me?

Statists have indoctrinated Americans into believing that healthcare is not a cash business. Healthcare prices are too high and often unknowable, thereby requiring cashless transactions and claims forwarded to insurance companies to work out payments with policyholders and providers.

The pages have discussed examples of viable healthcare market alternatives, some grounded in cash payments, evolving as conventional approaches worsen. Now, as Obamacare has pushed insurance-driven markets to the brink, alternative cash-based markets continue to coalesce.

One is called direct primary care. Instead of accepting insurance for routine visits and medicines, practices composed of one or more primary care docs charge monthly membership fees that cover most of what patients need--including office visits and lower priced drugs.

The allure to patients is cost effectiveness and simplicity. Monthly fees are often about $50. There are no copay snarls with insurance companies or bickering with claims adjusters about what gets reimbursed. There are also no pre-existing condition hurdles to overcome.

Physicians are attracted to the idea of eliminating insurers as well. Less bureaucracy frees time to spend with patients. In direct primary care practices, docs can return to being their own bosses.

But wait, isn't this model fundamentally equivalent to the insurance model? After all, patients still pay a monthly fee that looks like an insurance premium for access to an array of services. The answer is no. The key difference is that the system is not based on third party payers. Consumers are buying healthcare services with their own money, but they are prepaying for them. Doctors are pricing their services to customers, but in bundles rather than one-at-a-time. If a customer appears to be overusing services, then docs have incentive to do something about it. If care pricing or quality deteriorate, then patients have incentive to do something about it.

Stated differently, direct primary care is not an 'other people's money' arrangement.

Direct primary care does not cover specialized services or catastrophic care. As such, it does not eliminate markets that insure against large, unanticipated healthcare expenses. But that is proper function of insurance. Car and home insurance policies do not cover routine maintenance. They insure against tail risk. Properly functioning health insurance markets would do the same.

The evolution (actually, the re-evolution) of cash health care markets is but one example of entrepreneurship sure to occur as Obamacare and its statist healthcare ilk inevitably falter.

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